Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to Western Soya Company for a four-year period ending December 31, 2028, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $500,000 to manufacture and has an expected useful life of six years. Its normal sales price is $547,590. The expected residual value of $15,000 on December 31, 2028, is not guaranteed. Equal payments under the lease are $155.000 (including $5,000 maintenance costs) and are due on December 31 of each year. The first payment was made on December 31, 2024. Western Soya's incremental borrowing rate is 9% • Western Soya knows the Interest rate implicit in the lease payments is 8%. Both companies use straight-line depreciation or amortization.

Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to Western Soya Company for a four-year period ending December 31, 2028, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $500,000 to manufacture and has an expected useful life of six years. Its normal sales price is $547,590. The expected residual value of $15,000 on December 31, 2028, is not guaranteed. Equal payments under the lease are $155.000 (including $5,000 maintenance costs) and are due on December 31 of each year. The first payment was made on December 31, 2024. Western Soya's incremental borrowing rate is 9% • Western Soya knows the Interest rate implicit in the lease payments is 8%. Both companies use straight-line depreciation or amortization.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 13P

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Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2016, Rhone-Metro leased equipment to Western Soya Co. for a four-year period ending December 31, 2020, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $300,000 to manufacture and has an expected useful life of six years. Its normal sales price is $365,760. The expected residual value of $25,000 at December 31, 2020, is not guaranteed. Equal payments under the lease are $104,000 (including $4,000 executory costs) and are due on December 31 of each year. The first payment was made on December 31, 2016. Collectibility of the remaining lease payments is reasonably assured, and Rhone-Metro has no material cost uncertainties. Western Soya’s incremental borrowing rate is 12%. Western Soya knows the interest rate implicit in the lease payments is 10%. Both companies use straight-line depreciation. Required: 1. Show how Rhone-Metro calculated the $104,000…
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Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to Western Soya Company for a four-year period ending December 31, 2028, at which time possession of the leased asset will revert back to Rhone-Metro. ● ● The equipment cost $550,000 to manufacture and has an expected useful life of six years. Its normal sales price is $607,484. The expected residual value of $25,000 on December 31, 2028, is not guaranteed. Equal payments under the lease are $163,000 (including $3,000 maintenance costs) and are due on December 31 of each year. The first payment was made on December 31, 2024. Western Soya's incremental borrowing rate is 8%. Western Soya knows the interest rate implicit in the lease payments is 6%. Both companies use straight-line depreciation or amortization. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) ● Required: 1. Show how Rhone-Metro…
Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2016, Rhone-Metroleased equipment to Western Soya Co. for a noncancelable stated lease term of four years ending December31, 2020, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost$300,000 to manufacture and has an expected useful life of six years. Its normal sales price is $365,760. Theexpected residual value of $25,000 at December 31, 2020, is not guaranteed. Western Soya Co. can exercise abargain purchase option on December 30, 2019, at an option price of $10,000. Equal payments under the leaseare $134,960 (including $4,000 annual executory costs) and are due on December 31 of each year. The first paymentwas made on December 31, 2016. Collectibility of the remaining lease payments is reasonably assured,and Rhone-Metro has no material cost uncertainties. Western Soya’s incremental borrowing rate is 12%.Western Soya knows the interest rate implicit in…
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On December 31. 2021. Rhone-Metro Industries leased equipment to Western Soya Co. for a four-year period ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost Rhone-Metro $365,760 and has an expected useful life of six years. Its normal sales, price is $365,760. The lessee-guaranteed residual value at December 31, 2025, is $25,000. Equal payments  under the lease are $ 100,000 and are due on December 31 of each year. The first payment was made on December 31, 2021. Western Soya's incremental borrowing rate is 12%. Western Soya knows the interest rate implicit in the lease payments is 10%. Both companies use straight-line depreciation or amortization. Required: Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2025, assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,500.
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